Can re-engineered Kleenex cure brand's sniffles?

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NEENAH, Wis. -- Everywhere you look, Kleenex is under siege. Cheap generic tissue is tearing into its market share. Meanwhile, it faces mounting pressure in a consumer-products industry obsessed with infusing even humble paper products with innovation and high-tech ingredients. Olay's Total Effects cleansing wipes use a "Vitalipid system," which delivers antiaging moisturizers with vitamins E, B-5 and lipids. Pledge Clean & Dust cloths contain "antistatic agents" that promise to remove dust and allergens as they clean furniture.

Where does that leave Kleenex, an 83-year-old brand so mundane it has become synonymous with tissue itself? Top executives at Kimberly-Clark Corp. are making a high-stakes bet they have an answer: Kleenex laced with a mild pesticide to fight cold and flu viruses.

Kleenex's predicament can be found up and down the aisles of supermarkets and drugstores, where marketers are in a race to re-engineer the classic products of America's cupboards. Procter & Gamble Co. turned old Mr. Clean into a new line of pretreated sponges dubbed "Magic Eraser," and a line of car-care products, and its cleaning solution added fragrances such as "Sparkling Apple." Kellogg Co.'s Special K cereal recently added a line of "protein meal" bars and even "Special K20 Protein Water," in strawberry-kiwi, lemon-twist and tropical-blend flavors.

Companies need to play this game because giant retailers like Wal-Mart Stores Inc. are demanding fresh choices for consumers -- and filling their shelves with their own cheap, generic lines of basics.

For Kleenex, the need for change is greater than ever. With $1.6 billion in global sales, Kleenex is part of Kimberly-Clark's consumer tissue division, which contributes more than a third of the company's annual sales. But plagued by high prices for energy and pulp, it has the smallest profit margins of the company's three divisions. Launched in late 2004, Kleenex Anti-Viral now looms as an important weapon.

Kimberly-Clark introduced Kleenex tissues in 1924 as a handy way for women to remove cold cream from their faces. Over the decades, the company kept its edge by thinking up new ways to use a piece of tissue paper.

In the 1930s, it touted Kleenex as a disposable handkerchief. A decade later, marketers boasted that the tissues could help kill spiders, wipe up spills and be used in magic tricks. TV commercials in 1967 heralded the convenience and table-appeal of new cube-shaped boxes. In 1981, Kleenex pioneered the first perfumed tissue, with a light floral scent.

But lately the pressure to innovate has grown intense. The facial-tissue category has been shrinking steadily since 2001. With annual sales of $1.6 billion, the Kleenex tissue brand accounts for about 10 percent of the total revenue of Kimberly-Clark, which also makes Huggies diapers and Scott paper towels.

Tissue sales suffered their sharpest decline in the past five years, with unit sales down 6.1 percent in 2006, according to Information Resources Inc. Its data measures sales through supermarkets, drugstores and mass-merchandise outlets excluding Wal-Mart, which doesn't provide sales data. Kleenex tissue sales fared worse, with unit sales down 9.7 percent last year. Lower-priced private-label brands gained market share. Kimberly-Clark, which declined to provide specific sales figures, says its market share last year remained about flat with the year before.

One reason for tissues' misfortunes: Consumers increasingly reach for alternatives, including paper towels, toilet paper and free napkins available at coffee shops and fast-food chains.

"It's about using what's present, what's convenient," says Erin Fowler, a consumer-research analyst for Mintel International Group, a market-research firm. "You're not going to go through the motion of putting facial tissues on the shopping list if something else is working."

Advances in cold therapies may also have taken a toll. "Over-the-counter and prescribed medicines are much better at treating the symptoms, so there is arguably some (tissue sales) erosion," says Steve Erb, Kleenex's associate marketing director.

So in 2004, marketers gave Kleenex a new mission: kill germs. That "had the potential to grow the entire category and increase household consumption," recalls Mr. Erb. "It could alter people's perceptions of what a Kleenex facial tissue could do."

A germ-fighting tissue forced the company into unusual terrain. Because it uses a pesticide, for example, Kimberly-Clark needed to secure approval from the Environmental Protection Agency.

Kleenex's traditional, soft-touch marketing tone would also require some tweaking. "There was discomfort over whether the power of the brand could overcome the 'killing' idea," says Mr. Erb.

The company had stumbled along a similar path in 1984, when it also tried a germ-fighting tissue. Before the 1990s onslaught of antibacterial soaps, fabrics and hand wipes, the idea of a chemical-laced tissue was foreign to consumers. Kleenex's product cost 20 percent to 40 percent more than regular tissues. It had an intimidating name: Avert Virucidal. Consumers complained that the paper felt slimy and stung their eyes. Some even said it made them sneeze.

After just a few months in five test markets, Kimberly-Clark pulled it from shelves. "We were way before our time," says Cheryl Perkins, Kimberly-Clark's former chief innovation officer.

But the idea of adding ingredients to tissues didn't go away. In 1987, Procter & Gamble launched Puffs Plus With Lotion, the first tissue treated with lotion. Kimberly-Clark later responded with its own lotion-treated tissue as well as a menthol-scented one. Those proved popular, demonstrating that consumers would pay more for versions of Kleenex they believed had added benefits.

In the late 1990s, buoyed by the new success of hand sanitizers and antibacterial soaps, Kimberly-Clark decided to re-examine the antiviral idea. The company also sensed an advantage: The only dominant antiviral products on the market were cleaning agents such as bleach and other surface disinfectants, says Kleenex brand manager Jean Maurice Boyer. Paper products targeting germs, such as hand wipes, were still relatively scarce. And those were specifically focused on killing bacteria, not viruses, Kimberly-Clark's main target.

Company research pointed to one yucky habit that supported the push into germ fighting: 74 percent of consumers stash used tissues in places such as purses, pockets and drawers and on countertops -- often to re-use them. So a tissue capable of deactivating viruses could protect others from exposure.

At its facilities here in Neenah, Wis., Kimberly-Clark found a way to manufacture the antiviral tissue more cheaply than it had with Avert, while adding extra softness. This involved disassembling the three tissue layers to apply a mixture of citric acid and sodium lauryl sulfate, and then putting them back together. Chemical additives to the outer tiers gave the tissues a silky feel.

When a sneeze or a cough hits the tissue, the middle layer traps and kills 99.9 percent of viruses within 15 minutes, the company claims. While antiviral drugs are hard to make, it's considered relatively straightforward to kill a virus outside the body -- such as by swabbing it with bleach.

Public-health officials have worried that the widespread use of antibacterial products are contributing to drug-resistant strains, but wiping off a virus with commonly used ingredients generally doesn't raise that alarm. Kleenex's antiviral tissues target viruses that are the most prevalent causes of the flu and common cold, including rhinoviruses type 1A and 2. The antiviral tissue's active ingredients, citric acid and sodium lauryl sulfate, constitute a pesticide that destroys the virus's wall, deactivating the virus, the company says.

It discovered how to make the antiviral treatment without malic acid, a previous ingredient that had caused skin irritation. Avert's old, medicinal box -- navy blue and white squares -- was scrapped in favor of a more colorful, patterned one.

Some health experts remain skeptical of the tissue's health benefits. Cold viruses, as Kimberly-Clark points out, are expelled in the form of tiny droplets, can travel up to 320 miles per hour, land up to three feet away, and survive on surfaces for more than 24 hours. "Maybe this is an added level of protection," says Nicholas Stamatos, assistant professor at the Institute of Human Virology at the University of Maryland Medical Center. "But what you're achieving with this, you'll achieve better by washing your hands."

Some loyal Kleenex users doubt their tissues need more bells and whistles. Diane Brabender says she always has a box of tissues on hand, keeping them in both of her bathrooms, her car and her office. Ms. Brabender, a bank trust officer from Cincinnati, says she's willing to spend more for Kleenex tissues because they are softer than generic brands. Even so, she's not willing to splurge on an antiviral tissue. "I just don't believe it's really going to make a difference to my health or anyone else's," she says. "I just need a tissue to catch my sneeze -- it doesn't have to do anything else."

Kimberly-Clark didn't want to position Anti-Viral too aggressively as a preventive health product. "We knew it would hold the product back -- if it became the sick box," says Gary Keider, Kleenex's marketing director. "We knew from a sales and volume perspective that the box had to be out often, otherwise consumers would use it sparingly, and at limited times."

Hedging its bets, the company decided to trumpet the tissue's antiviral properties only on the box's plastic overlay, typically removed when the container is opened. As a reminder that the tissues are treated, a liner surrounding the box's opening says "anti-viral" in small type.

To further distinguish the antiviral tissue from regular ones, Kleenex printed tiny blue dots on the visible middle layer, where the antiviral treatment is applied. Even this was a tough call: Kleenex stopped making tissues with printed designs in the late 1990s in response to consumer concerns about the environmental impact of inks and dyes.

In order to make its flu-fighting claims, Kimberly-Clark had to get approval for its pesticide-laced product from the EPA, rather than the Food and Drug Administration since tissues aren't ingested. After a yearlong review, the EPA approved the product in 2003, with certain caveats. The agency, for example, required that Kleenex state on its label that the product hadn't been tested against bacteria, fungi or other viruses.

EPA policy placed restrictions on the box design, forbidding anything that appeals directly to children. Neither could the container portray anything edible or found in nature, including flowers -- a ubiquitous design on Kleenex boxes.

For its ads, Kleenex considered a bold approach, showing a little girl blowing her nose and a message that punched up the tissue's tough side. After focus groups didn't seem to mind, the brand started running the print ads in 2005. The tagline: "Ruthless Killer."

Priced about 40 percent more than standard Kleenex tissues, the product was launched in late 2004. Kimberly-Clark says that Anti-Viral now holds 4 percent of the U.S. market and has generated more than $140 million in global sales since its 2004 launch. Now in 22 countries, Anti-Viral's international shipments are expected to increase this year as the product passes various governmental clearances.

In addition to targeting households, Kimberly-Clark has worked hard to gain a presence in schools. Because most teachers list a box of tissue on their list of students' necessary school supplies, back-to-school season is one of the biggest selling periods for facial tissue. A nationwide Kimberly-Clark-sponsored classroom handout titled, "What To Do When You Ah-Choo! Learning About Sneezes and Sniffles," has included buy-one-get-one-free coupons for Kleenex Anti-Viral tissues.

When flu outbreaks closed schools in Texas and Michigan in 2005, Kimberly-Clark shipped them dozens of free boxes of antiviral tissues. The Lovelady Independent School District in Lovelady, Texas, put two boxes in every classroom.



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